We study the localization dynamics for a two level atom coupling with a single-mode cavity field initially in a squeezed vacuum state. The reduced density matrix for the atomic spatial degrees of freedom is given analytically where its decay behavior is described by a decoherence factor. It is found that the atomic spatial decoherence is induced by the back-action of the photon emitted from the atom and depends strongly on the field’s squeezed constant. For sufficiently large squeezed constant, the decoherence can occur in finite time. Our results also show that the maximal decay is related with the atomic position.